Compare Mortgages

It is important to compare various mortgage options and pricing so that it meets your requirements and saves you money. Here are a few tips on how to choose and compare mortgage plans:

(1) Fixed Rate or Variable Rate

The interest rate on a fixed-rate mortgage is set for a pre-determined contract term - usually between 6 months to 15 years. This type of mortgage offers you the security of knowing what you will be paying for the term so that you can budget financially.

With a variable rate mortgage, interest rates may fluctuate from month to month depending on market conditions. If interest rates go down, more of the payment goes towards reducing the principal; if rates go up, a larger portion of the monthly payment goes towards covering the interest. You usually get a deeper discount than the Canadian banks' prime rate from Valueland.

(2) Long Term or Short Term

You need to consider your own situation to determine which term is best for you. Usually, short term mortgages have lower rates with uncertainty on the future interest rate on renewal; the longer term provides you with certainty that your interest rate is guaranteed for the term, although it is a little bit higher than the short term rates.

(3) Interest Rates

With interest rates offered to you, with some promotion plans, from banks or other providers, how do you make sure that you are getting the best mortgages? You need to calculate the interest you pay for the term to evaluate your mortgage plan options. Ultimately, it is the amount of interest you pay to the bank that counts. Use the following calculator to compare:

>> Mortgage Comparison without Promotional Periods

(4) Prepayment Options

Another area of comparison is the prepayment options and break-up penalty. For prepayment options, you can pay 10% to 25% of original mortgage amount as extra payments annually. Different lenders offer different percentages for you to use. Apparently, the higher the better, becasue whatever you pay extra will be used an paying down your mortgage principal. The frequency of extra payment is also useful as the more frequent you can pay the less interest you pay to the lender.

For the break-up penalty, you, as a consumer, need to be aware of this clause. The closed term mortgage may allow you to break the term (transferring to other banks, you pay it in full or you sell your home), but you need to pay a penalty. The penalty is usually three months' interest of the remaining mortgage principal. With some mortgages, the penalty is the greater of three months' interest or the interest difference.

To summarize, to get the best mortgage, you need to evaluate the above aspects and arrive at a mortgage that suits you the best.